60. Can I take you to the DEFRA line, 2.7 per
cent average, but it too has a 15 per cent increase in the first
year, then a reduction and then a slight increase the year after.
What is behind that profile? It is surprising it actually has
a cut in the middle.
(Mr Sharples) There is a bit of a hump in year one.
I am not absolutely sure what that relates to, but it is almost
certainly a one-off factor which is boosting the budget in that
year and disguising the underlying trends.

61. I have been trying to find out what it is.
If you turn to chapter 16 on page 111 we get some more detail
on the DEFRA budget, but I do need you to explain to me what it
says in the box because it says, "This Spending Review delivers
an additional £421 million in 2005-06 compared with 2002-03
. . .This includes", it says in the bullet point, "investment
totalling over £500 million . . . on sustainable food and
farming". How do you get £500 million out of the £421
million increase?
(Mr Sharples) Well, the £500 million is total
spending over the three years, so that is a cumulative figure
and, as it explains, that includes funding rising to £200
million in the third year to implement the core recommendations
of the Currie Commission.

62. In the third year?
(Mr Sharples) That is right, rising to £200 million
in 2005-06.

63. Basically what I am trying to get at is
do we know because it looks to me as though one of the big items
which has been added to DEFRA is delivering on the Currie Report,
so would I be right in inferring that because of the surges in
2003-04, most of the implementations of Currie are in the first
year?
(Mr Sharples) No, the implementation of Currie builds
up, as explained in that box, with £200 million being spent
in the third year.

64. Currie has got about 45 recommendations
that it wants to see implemented and the Government says it is
going to do them. When I look at the Public Service Agreement
to try to find out whether there are price checks on the different
recommendations in the Currie Report, I can find one line on it
on page 27 and it says, "Objective 4 for this Department
is to promote sustainable, diverse, modern and adaptable farming
with domestic and international actions". Is that it? Is
that the Public Service Agreement on Currie?
(Mr Sharples) Well, there are other targets within
the DEFRA PSA to which the efforts on sustainable farming will
contribute, such as the environmental targets within that PSA,
but you are quite right to highlight that particular target as
the key one that this is directed to.

65. So are there any price-tags attached to
any of the specific recommendations in the Currie Report? Do they
exist somewhere?
(Mr Sharples) Well, clearly costings have been done
and they have been taken account of in setting these plans.

66. So they are not part of the PSA?
(Mr Sharples) Well, detailed breakdowns are not published
at this stage. It is for the departments to finalise their internal
division of their total budgets once they see the overall settlements
and full details are then published in the departmental reports
that the departments publish next spring.
(Mr Macpherson) I should imagine that the Secretary
of State for DEFRA will be setting out her detailed proposals
consistent with these plans in the near future.

Mr Laws

67. Mr Sharples, would you describe the spending
settlement on defence as being a good one or even an excellent
one?
(Mr Macpherson) Yes, I would certainly describe it
as a good settlement.

68. I was asking Mr Sharples actually.
(Mr Sharples) The settlement provides for steady real
growth in the defence programme, and this is for the first time
that spending plans have provided for steady real growth in defence
spending, so in that sense it is a settlement which demonstrates
the commitment of the Government in ensuring that the armed forces
are properly funded and that growing insecurities across the world
are being addressed through our defence effort.

69. So you would agree with the press release
which was put out which has a line from Geoff Hoon saying, "This
is an excellent settlement for defence"?
(Mr Sharples) I would agree with that entirely, yes.

70. The Treasury would be happy with that characteristic?
(Mr Sharples) Indeed.

71. Can I just ask you to have a look at the
table on page 167 of the Spending Review document which shows
the Departmental Expenditure Limits in real terms between last
year and the period going to the end of the Spending Review. What
they appear to show is that the amount we spent in real terms
on defence last year is greater than the amount that we are going
to spend in any of the years in this entire Spending Review.
(Mr Macpherson) I think it is important here to bear
in mind how we approach defence spending. Clearly plans have been
set out for the next three years, but in any one year there are
reserve claims associated with, for example, fighting wars, deploying
troops in various areas, be it in Sierra Leone or Afghanistan
or Kosovo, and those requirements are always financed through
the reserve, so if you actually strip out reserve claims and I
think also a special technical resource- accounting issue associated
with a £Ö billion provision in the defence budget, you
actually would get a figure a lot lower than 30.7.

72. How big is the allocation from the reserve
to defence in 2001-02?
(Mr Macpherson) I think it is around £1 billion.

73. That is a reliable figure or order of magnitude?
(Mr Macpherson) That is a reliable figure and, as
I say, on top of that there is in excess of £Ö billion
provision in the resource budget.

74. But it would be reasonable to say that in
all the years of this Spending Review up to 2005-06, we will be
spending less on defence than we were in the last financial year?
(Mr Macpherson) I think that depends totally on the
international environment.

75. Well, on the basis of your budgeted figures
obviously.
(Mr Macpherson) Clearly if you deploy troops in, to
use the term, theatre, that costs additional money. There is no
question of that. So a lot will depend over the next few years
on the international environment.

76. So if we had, for example, a war in Afghanistan
or Iraq, then we might see these figures moved up, but without
such a conflict, it would be the case that we spent more last
year on defence in real terms than in the Spending Review?
(Mr Macpherson) There is no doubt that if you deploy
troops across a wide front in significant numbers, then that adds
to the cost of the defence budget.

77. Can I just ask about the departmental expenditure
finance quite briefly. There has been quite a lot of publicity
over the last two days since the Spending Review was announced
of big underspend in the Education Department and there is a story
today in the press that the Secretary of State for Education is
very upset about this and finds it embarrassing because it seems
that even though she has been allocated more money, she has not
actually been able to spend the money the Department already had.
Can you confirm whether or not those reports of the order of magnitude
of the underspend are correct and are you satisfied with that
situation?
(Mr Macpherson) First, I think it is worth putting
the issue of underspend in perspective. The aggregate underspend
in the year just finished for the Departmental Expenditure Limits
as a whole was 0.05 per cent, I think less than £100 million,
which is a very, very small number. Now, clearly within that there
are variations between departments. There is also the issue of
a quite large amount of end-year flexibility which departments
can draw down and, interestingly, last year the draw-down of end-year
flexibility very much matched the emerging underspends which suggests
that, as far as EYF is concerned, we are very much reaching a
steady state.

78. What is the size of the underspend in education
particularly?
(Mr Macpherson) Well, I would like to come on to education
because I see that Adam has the figures in front of him and he
will tell you about it.
(Mr Sharples) The figures are published in the Outturn
White Paper which we publish each July and the total underspend
on education was around about £1.2 billion and that was spread
across a range of different education activities. One thing which
I think has been rather misleading in the coverage is the suggestion
that somehow there is a failure to get money through to schools.
On the whole, this is not an underspend on the schools budget;
that flows through in a straightforward way to local authorities
and to schools, sums of money going through directly, but in some
areas of that Department's activities, there have been underspends.

79. Do you know which areas?
(Mr Sharples) It is spread, I think, fairly evenly
across a range of programmes concerning some of the early years
programmes, some of the learning skills councils programmes.